In short
The Banks Act reserves to registered banks the business of accepting deposits from the general public as a regular feature of a business and using that money to grant loans. Both limbs matter. Lending your own capital is unaffected by it. Taking money from other people, owing them its return, and placing it with borrowers is the reserved activity, and conducting it without registration is a criminal offence. There is a narrow exclusion for a deposit accepted by someone who does not hold themselves out as taking deposits regularly and has not advertised for or solicited it, but it carries further limits and is not a general permission for informal fundraising.
There is a line in South African law that matters more than almost anything else on this site, and most people who cross it never knew it was there. On one side you are a lender. On the other you are running an unregistered bank, which is a criminal offence.
The line is not about how much you lend. It is about whose money you are lending.
01 — The lineYour money, or other people's?
| What you are doing | Where that sits |
|---|---|
| Lending your own capital to borrowers | Ordinary lending. The National Credit Act may apply depending on who is borrowing, but the Banks Act does not come into it. |
| Taking money from the public and using it to make loans | This is the business the Banks Act reserves to registered banks. Doing it without registration is an offence. |
The Act describes the reserved business in two limbs that work together: accepting deposits from the general public as a regular feature of the business, and using that money to grant loans. Do both and you are conducting the business the Act protects.
The Act as first published in 1990 was titled the Deposit-taking Institutions Act and speaks of a 'deposit-taking institution' where the current Act says 'bank'. It was renamed by later amendment. The structure of the prohibition is unchanged, but anyone quoting the section should work from a current consolidated text.
02 — The barrierWhat registration actually requires
It is worth being blunt about how closed this door is. The Act does not merely require registration — it requires the person conducting the business to be a public company, provisionally or finally registered.
That is not a licence you apply for over a few weeks. It is a capital, governance and prudential regime supervised by the Prudential Authority at the Reserve Bank. For practical purposes, if you are reading this page wondering whether you need to register, the answer you are looking for is how to stay on the other side of the line.
03 — In practiceHow ordinary arrangements drift across the line
Almost nobody sets out to run an unregistered bank. People arrive there by increments, and the increments look reasonable at each step.
- You lend your own money to a borrower you know. Nothing here.
- A friend asks to come in on the next one. You take their R200 000 and lend it alongside yours, promising them a return.
- It works, so you do it again with two more people. You now hold money from three people and you are placing it with borrowers.
- Someone mentions it to someone else. You are no longer approaching people you know — people are approaching you.
- You mention it online, or at an event, or in a group. You are now soliciting.
Nowhere in that sequence is there an obvious moment of wrongdoing. But by the end you are accepting money from the public as a regular feature of what you do, and lending it on — which is the definition.
The exclusion, and why it is narrower than it sounds
The Act excludes a deposit accepted by someone who does not hold themselves out as accepting deposits on a regular basis and who has not advertised for or solicited it.
Read the two conditions carefully, because both have to hold:
- Not holding out. The moment you describe yourself as someone who takes investors, you are holding out.
- Not advertising or soliciting. A message in a group chat is soliciting. So is mentioning it at a networking event with a view to being approached.
The exclusion also carries provisos in the current text limiting the number of depositors and the amounts. It is not a general permission for informal fundraising, and nobody should rely on it without advice on the current wording.
04 — Staying clearThe structures people use instead
Wanting to deploy more than your own capital is a perfectly ordinary commercial ambition, and there are lawful ways to do it. Each is a regulated route of its own with its own advice requirement — the point here is only that they exist and that improvising is not one of them.
- Lend only your own capital. The simplest answer, and the one that keeps you entirely out of this question.
- Each lender lends in their own name. If three people each contract directly with the borrower for their own share, nobody is taking deposits from anybody. The administration is more work and the intercreditor position needs care.
- A properly constituted fund or scheme, run under the regime that applies to it. This is a licensing question with its own costs and its own advisers.
- Participate in someone else's regulated structure rather than building your own.
05 — The boundaryWhat this page does not decide
This page describes the shape of a prohibition. It does not tell you whether a particular arrangement falls inside it, and that judgement turns on details — who contracts with whom, who bears the credit risk, what was said to whom, and how the money actually moves.
The Act has also been amended extensively since 1990, and the current consolidated wording is what governs. If you are pooling money in any form, this is the one question on this site worth paying an attorney to answer properly.